Xcel Energy Inc. Q1 2010 Earnings Call Transcript

Xcel Energy Inc. Q1 2010 Earnings Call Transcript
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Xcel Energy Inc. (XEL)

Q1 2010 Earnings Conference Call

April 29, 2010 11:00 AM

Executives

Paul Johnson – Managing Director of Investor Relations & Assistant Treasurer

Ben Fowke – President and COO

Dave Sparby – VP and CFO

Analysts

Ali Agha – SunTrust Robinson Humphrey

Nathan Judge – Atlantic Equities

Timothy Yee – KeyBanc

Mark Barnett – Morningstar

Sarah Acres - Wells Fargo

Presentation

Operator

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Welcome to the first quarter 2010 earnings conference call. During today’s presentation, all parties will be in a listen only mode. Following the presentation, the conference will be open for questions. (Operator Instructions)

The conference is being recorded today, Thursday April 29, 2010. I would now like to turn the conference over to Managing Director of Investor Relations and Assistant Treasurer Mr. Paul Johnson, please go ahead sir.

Paul Johnson

Thank you and welcome to Xcel Energy’s first quarter 2010 earnings release conference call. I’m Paul Johnson. With me today are Ben Fowke, President and Chief Operator Officer; Dave Sparby, Vice President and Chief Financial Officer; Teresa Madden, Vice President and Controller; Scott Wilensky, Vice President, Regulatory and Resource Planning and George Tyson, Vice President and Treasurer.

Today we plan to cover our first quarter results and accomplishments. In addition, we are reaffirming our annual guidance of a $1.55 to a $1.65 per share. Please note that there are slides that accompany the conference call, which are available on our web page. I want to remind everyone that some of our comments may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and our filings with the SEC.

You’ll note that today’s press release refers to both GAAP and ongoing earnings. The difference between first quarter 2010 ongoing and GAAP earnings is related to nonrecurring items, which I will explain in a moment. First quarter ongoing earnings were $0.42 per share in 2010 compared with $0.38 per share in 2009. GAAP earnings were $0.36 per share in 2010 compared with $0.38 per share in 2009. The $0.06 variance is due to the following items.

In March of 2010, the Patient Protection and Affordable Care Act was signed into law. One of the provisions of the act reduces deductibility of retiree healthcare costs. Based on this provision, Xcel Energy is subject to additional tax and is required to reverse previously recorded tax benefits. As a result, we expensed $17 million or $0.04 per share of previously recognized tax benefit related to Medicare Part D subsidies in the first quarter of 2010.

In addition, after reaching an agreement in principle with the IRS during the first quarter, Xcel Energy recorded an adjustment of $0.02 per share for interest and taxes associated with the completion of a comprehensive tax reconciliation related to Xcel Energy's discontinued company-owned life insurance program.

We do not consider either of these two items as part of ongoing earnings as they are not expected to reoccur in the future. Management believes ongoing earnings, which removes the impact of non-reoccurring items provides a more meaningful comparison. As a result, we will discuss ongoing earnings during the remainder of this call.

Please see are our first quarter earnings release for a reconciliation of GAAP to ongoing earnings.

With that I'll now turn the call over to Ben Fowke.

Ben Fowke

Thanks, Paul and welcome everyone. As Paul mentioned, this morning we reported first quarter ongoing earnings of $0.42 per share compared with $0.38 per share in 2009. This is a positive start to the year. Dave Sparby will discuss quarterly results in more detail. I'll focus my comments on some recent developments in Colorado.

We recently announced an agreement to acquire two natural gas plants from Calpine for $739 million. These generation facilities currently provide power to our customers in Colorado through purchase power agreements. Acquiring these assets will provide long-term cost savings to our customers. We believe that owning these plants is important as we strive to meet Colorado's new 30% renewable portfolio standard by 2020.

In addition, we expect the transaction will be accretive in 2011 and will drive earnings growth for shareholders. The acquisition is subject to state and federal regulatory approvals. In May we will make a filing with Colorado Commission seeking approval of the acquisition and interim rate recovery of the revenue requirements associated with the plants.

We anticipate that this acquisition will have a small impact on customer bills as the rate increase will be offset by savings in capacity payments on other current PPA. The transaction is expected to close in December 2010.

In April, the Clean Air-Clean Jobs Act was signed into law by Governor Ritter of Colorado. The bill establishes a timeline and regulatory framework for PSCo to develop a plant to potentially retrofit, retire or replace 900 MW or more of older and less efficient coal fire generation. PSCo may retrofit its existing coal fired plants with emission controls, will retire and replace the plants with natural gas fire generation or other low-emitting resources.

We will file our plan with the Colorado PUC by mid August and the commission will roll in the plan by year end. The law allows for right of recovery of the investments associated with this bill. The bill also allows for interim rates and helps with achieving forward test years in general rate cases. This is another great example of our ability to work with key stakeholders to arrive at a creative solution to reduce the emissions while ensuring timely recovery of cost.

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